Analysts Cut BlackBerry Targets; Nomura: No Reason To Own It

By Johanna Bennett

With Blackberry’s (BBRY) attempt to sell itself now on the scrap heap and no other buyer in sight, sell-side analysts are ditching their price targets for the troubled smartphone maker.

National Bank Financial downgraded the stock to Underperform from Sector Perform and cut its price target from $9 to $3. Meanwhile, analysts at Credit Suisse, Canaccord Genuity and FBR cut their 12-month stock price outlooks from $9 to $7, $7 to $6 and $8 to $6.50 respectively.

…we believe a sale of BlackBerry is no longer imminent and few – if any – candidates remain to purchase the company in its entirety. While we maintain our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability, we now believe a breakup is more likely than an outright sale and fundamentals will continue to deteriorate over a now-longer public sale process under new management.

Back in September, Blackberry agreed to a tentative, $4.7 billion deal to sell itself to Fairfax Financial Holdings. Fairfax would then take Blackberry private, betting that the company would have a better chance of staging a comeback away from the eyes of the public markets.

Investors were expecting an update today on Fairfax’s bid. Instead, Blackberry abandoned efforts to sell itself, replaced its chief executive and raised $1 billion selling convertibles to Fairfax and a group of institutional investors.

Investors did not approve, sending the shares falling 16% to %6.50 in afternoon market action.

Not all sell-side analysts cut their price targets. Normura analysts Stuart Jeffrey and Woo Jin Ho maintain their $8 price target. Still, the pair are hardly bullish on Blackberry. In a note published today, they wrote:

We believe the failed acquisition bid likely accelerated the search for an alternative and accelerated the pace of declines in devices and services sales. We still see no strategic buyer emerging for Blackberry, and the company looks likely to have to restructure operations significantly while public if no other financial bidders emerge, which seems unlikely in our view. As long as the company continues to sell handsets below cost and is unable to stem the decline in services revenue and subscribers there’s no reason to own the shares, and no sum of the parts to provide a floor value, in our view.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.